After several years of rapid expansion, the global electric vehicle (EV) industry encountered considerable challenges in 2024, which also affected lithium demand.

While EV sales remained strong in the Asia-Pacific region, growth in the Americas slowed significantly, and Europe experienced a decline, leading to a noticeable deceleration in global lithium demand.

Lithium market challenges

The lithium market faced additional pressure due to an oversupply issue. Increased production, particularly in Australia and other regions, resulted in prices declining by approximately 80% from their peak levels. Experts anticipate a potential recovery in 2025, driven by improved EV market conditions and adjustments in lithium supply.

Regional trends in EV markets

The Asia-Pacific region, led by China, continues to be the dominant market for EV sales. In China, EVs now account for more than half of all vehicle sales, and this trend is projected to persist. Economic stimulus measures and incentives aimed at encouraging the transition from petrol-powered vehicles are expected to further support EV adoption in 2025.

Recovery in the Americas and Europe is less certain. Factors such as trade restrictions imposed by the European Union on Chinese-manufactured vehicles and potential policy changes under the incoming U.S. administration have created an unpredictable outlook. However, stricter CO2 regulations in Europe, effective from 2025, may encourage manufacturers to introduce more affordable EV models.

Tesla's production plans

Tesla plans to increase production by 500,000 units in 2025, supported by the launch of a low-cost passenger car and a robotaxi. Declining battery material costs could contribute to making EVs more affordable, potentially supporting demand across various regions.

Advances in lithium battery chemistry

The market for lithium batteries is evolving, with lithium iron phosphate (LFP) batteries gaining favour due to their lack of nickel and cobalt, which contrasts with the more traditional nickel-cobalt-manganese (NCM) batteries. This transition benefits lithium carbonate over lithium hydroxide, although regional preferences for battery chemistry vary.

Demand for energy storage

Demand for lithium in energy storage systems is growing significantly. In 2025, these systems are expected to account for 13% of total lithium demand, with an estimated year-on-year growth rate of 45%.

Disruptions in the lithium supply chain

The lithium supply chain faced notable disruptions in 2024. Oversupply challenges were worsened by delays in adjusting production to match market realities. Producers with high costs, particularly in China and Australia, encountered financial difficulties, prompting some to reduce or halt operations.

In China, lepidolite production - a major source of lithium - declined substantially in late 2024, with output halving from mid-year peaks. Further reductions are anticipated in 2025.

In Africa, lithium projects in Zimbabwe faced operational inefficiencies and cost challenges resulting from rushed development during the previous price surge. Some operations, including Sinomine's Bikita mine, have ceased production, while others face an uncertain future without price recovery.

In Australia, most hard-rock lithium miners, excluding Greenbushes, experienced cash flow constraints in 2024. Companies such as Mineral Resources and Pilbara Minerals suspended operations, while projects by Arcadium and Rio Tinto have been delayed to conserve resources.

Conversely, South American brine-based lithium producers performed well, with projects in Chile and Argentina poised for production expansion in 2025, supported by direct lithium extraction (DLE) technology. However, concerns remain about the scalability of these projects.

Price outlook and future supply

Lithium prices are expected to recover moderately in 2025. In 2024, inventories of lithium chemicals in China doubled, exerting downward pressure on prices. Normalisation of inventory levels is anticipated in the first half of 2025 if high-cost production continues to decline.

A projected surplus of 115,000 tons of lithium carbonate equivalent (LCE) in 2025 is expected to prevent significant price increases. Current spot prices range from AUD 10 to AUD 11 (US$ 6 to US$ 7) per kilogram, and further declines are considered unlikely.

New production is expected from mines such as Liontown Resources' Kathleen Valley in Australia and Ganfeng's Goulamina in Mali. However, sustained low prices could lead to further shutdowns of high-cost operations. Swing supply, which helps stabilise prices, will remain critical. Restarting idled capacity in regions such as Australia, China, and Zimbabwe will require sustained higher prices, estimated at AUD 15,000 to AUD 20,000 per ton of lithium carbonate.

Market stabilisation

The lithium market is anticipated to stabilise by 2025 through production cuts, delays in new projects, and strategic stockpiling. Growing demand from the EV and energy storage sectors is expected to contribute to modest price recovery, supporting a more balanced industry outlook.